GENERAL INSURANCE

Question 1

A tornado that destroys a property would be an example of what?

Answer 1

Peril.

Question 2

In Insurance contracts, when is the offer usually made?

Answer 2

When insurance application is submitted.

Question 3

Wagering on a sporting event is known as what type of risk?

Answer 3

Speculative.

Question 4

According to the Law of Agency, who represents principal?

Answer 4

Agent or Producer.

Question 5

What is the consideration on the part of the insurer?

Answer 5

A promise to pay in the event of a loss.

Question 6

A situation in which a person can experience only a loss and no gain presents what type of risk?

Answer 6

Pure risk.

Question 7

What are the three types of hazards?

Answer 7

Physical, moral, and morale.

Question 8

Conditions that increase the chance of a loss are known as what?

Answer 8

Hazards.

Question 9

What do individuals use to transfer their risk of loss to a larger group?

Answer 9

Insurance.

Question 10

What is risk?

Answer 10

Uncertainty of loss.

Question 11

What is the term for the causes of loss insured against in an insurance policy?

Answer 11

Peril.

Question 12

What document is required for an insurance company to transact insurance?

Answer 12

Certificate of authority.

Question 13

What are the five characteristics of an ideally insurable risk?

Answer 13

Loss must be

1) Due to chance.
2) Definite and Measurable.
3) Statistically predictable.
4) Not catastrophic
5) coverage cannot be mandatory.

Question 14

In the agent/insurer relationship, who is considered the principal?

Answer 14

Insurer.

Question 15

What type of insurer is formed under the laws of another state?

Answer 15

Foreign.

Question 16

What are the three types of agent authority?

Answer 16

Express, implied, and apparent.

Question 17

Insurance contracts are mandatory in nature. What does that mean?

Answer 17

Unequal values are exchanged between the parties to a contract.

Question 18

Insurers are classified according to their domicile. What are the three types of insurers?

Answer 18

Domestic, foreign, alien.

Question 19

What does indemnify mean in insurance?

Answer 19

To restore an insured to the same financial status as before a loss.

Question 20

When would a misrepresentation on an insurance application be considered fraud?

Answer 20

When it is intentional and material.

Question 21

What are methods of managing risk?

Answer 21

Avoidance, transfer, sharing, retention, and reduction.

Question 22

What four elements of an insurance contract?

Answer 22

Agreement (offer and acceptance), consideration, competent parties, and legal purpose.

Question 23

What does the term unilateral contract mean?

Answer 23

A unilateral contract is a one-sided contract. This means only one party makes an enforceable promise.

Question 24

What does the term reasonable expectations mean in insurance?

Answer 24

Certain expectations for coverage that a reasonable person would have based in sources other than just policy language.

Question 25

What type of authority is based on the agent’s actions, or words?

Answer 25

Apparent.

Question 26

What is consideration in an insurance contract?

Answer 26

Consideration is something of value that each party gives to the other. Consideration on the part of the insurer is binding.

Question 27

What is a warranty in an insurance contract?

Answer 27

An absolutely true statement upon which the validity of the policy depends.

Question 28

What provision states that if a policy allows for greater benefits than financial loss incurred, the insured may be compensated only for the amount loss?

Answer 28

Indemnity.

Question 29

If an insurer holds a Certificate of Authoritt, it is known as what type of insurer?

Answer 29

Authorized or admitted.

Question 30

In insurance contracts, when does acceptance usually occur?

Answer 30

When the insurer approves a prepaid application.